OPINION: Giving aid and comfort to the enemy

by David Archibald

News Weekly, May 24, 2014

During World War II, one Russian physicist realised that the United States was working on an atomic bomb when articles about high-energy nuclear reactions disappeared from the physics journals he subscribed to.

As an interested observer of coal-to-liquids (CTL) developments, this author noticed something similar when reading the program for the World CTL Conference held in Shanghai on April 16, 2013. There was almost nothing about China’s own CTL projects.

It is well known that the Chinese have been building coal-fired power stations at the rate of one a week. They are also building a number of CTL projects. But news on these projects now seems to come largely from Western equipment suppliers.

For example, the MAN Group of Germany announced the supply of compressors for the Ningxia CTL project that is being built by Shenhua — China’s largest coal company. The compressors will be used to make 40,000 metric tons of oxygen per day, which will enable that plant to produce 120,000 barrels of liquid fuels per day.

It seems that news on CTL projects in China has gone dark. Why would that be? The reason China has gone dark on its CTL projects is that it considers they give the country a competitive advantage. Shenhua has stated that its first CTL plant, a direct liquefaction facility in the Ordos Basin, has an all-in cost of $60 per barrel and that it is very profitable.

At that cost any company, and any country, in the world that has coal deposits could copy Shenhua’s successful example and start making money from their own CTL projects. That isn’t happening. Why might that be?

There is a big clue in the remarks of an analyst from the Paris-based International Energy Agency (IEA), largely funded by the United States. The role of the IEA is to talk down the oil price, as a counterpoint to the Organisation of the Petroleum-Exporting Countries (OPEC). (It is not to be confused with the Energy Information Administration, part of the U.S. government).

According to Manuel Quinones of Greenwire: “During a recent briefing in Washington, DC, IEA analyst Laszlo Varro was pessimistic about CTL. ‘Essentially, energy policy needs to replicate a war blockade,’ he said. ‘The only country that has meaningful investments in coal-to-liquids is China.’ Varro added, ‘It’s a big carbon dioxide factory.’ ”

With the EPA in the United States hell-bent on closing down existing coal-fired power stations, using carbon dioxide emissions as the excuse, a new coal-burning facility of any sort is going to be a difficult sell. The consequence is that the United States is denying itself its largest potential source of liquid transport fuel that is commercially viable given current oil prices and technology.

China has accelerated the rate of build-and-fill of its strategic petroleum reserves in the last few years. It could reach its formal target of almost 700 million barrels, equivalent to the U.S. strategic reserve, by 2015.

Now let’s go back to those quotations from the International Energy Agency analyst, “Energy policy needs to replicate a war blockade” and “The only country that has meaningful investments in coal-to-liquids is China.”

It seems that one of the reasons China is investing in coal-to-liquids technology is that it expects to be subject to a war blockade in a conflict that it will start itself.

On the other side of the Pacific, the United States — which will do the heavy lifting in any such war started by China — is handicapped by denying itself a potential supply of liquid transport fuels and the optimum allocation of its resource endowment.

The promoters of the global-warming scare are China’s unwitting helpmates in its attack on Western civilisation. In President Obama’s war on coal, only the Chinese will be the winners.